James L. Yeager, Ph.D. & Midwest Research Labs., LLC v. Innovus Pharms., Inc.

JAMES L. YEAGER, PH.D. andMIDWEST RESEARCH LABORATORIES, LLC, Plaintiffs, v. INNOVUS PHARMACEUTICALS, INC., Defendant.

No. 18-cv-397

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

February 5, 2019

Judge Thomas M. Durkin

MEMORANDUM OPINION AND ORDER

Plaintiffs James Yeager and Midwest Research Laboratories, LLC bring this action against Innovus Pharmaceuticals, Inc. for reputational harm suffered as a result of several publications Innovus made using Yeager's name. Innovus has moved to dismiss the complaint in full under Fed. R. Civ. P. 12(b)(2) for lack of personal jurisdiction in Illinois and Fed. R. Civ. P. 12(b)(6) for failure to state a claim for relief. For the following reasons, Innovus's motion to dismiss is granted in part and denied in part.

BACKGROUND

Yeager has a Ph.D. in physical pharmacy and specializes in the formulation of topical creams for various health and wellness needs. He is the CEO of plaintiff Midwest and the public face of the company throughout the pharmaceutical industry. In April 2012, Centric Research Institute ("CRI"), engaged Midwest and Yeager to develop a topical cream used to treat men with sexual dysfunction. Under the agreements between Midwest and CRI, Midwest and Yeager formulated a commercial product and assigned all their rights to the invention to CRI. As a result of their partnership, CRI launched CIRCUMSerumTM on April 13, 2013.

On April 19, 2013, CRI and Innovus entered into an asset purchase agreement under which Innovus acquired the global rights to market CIRCUMSerumTM, and CRI retained the right to commercialize CIRCUMSerumTM in the United States. Innovus commercialized the product under the name Sensum+&reg.

The gist of Plaintiffs' complaint is that although Yeager never gave permission to use his name, image, identity, or likeness in connection with the product, Innovus marketed the product with Yeager's name and implied endorsement. Specifically, Plaintiffs allege Innovus circulated advertisements and marketing materials in newspapers, magazines, pamphlets, and on social media sites. These materials "suggest, imply, and/or outwardly state" that Yeager endorses the product. Further, Plaintiffs allege that some of these publications falsely attribute quotes to Yeager, place Yeager in a false light, and falsely claim Yeager offered a satisfaction guarantee on the product. Plaintiffs allege at least one of these advertisements was circulated in Illinois—specifically, in the Chicago Sun Times in February 2017.¹

Plaintiffs bring one federal claim and four state claims against Innovus: (1) violation of the Illinois Right of Publicity Act and various other state statutes; (2) violation of Section 43(a) of the Lanham Act; (3) violation of the Illinois Deceptive Trade Practices Act; (4) violation of the Illinois Consumer Fraud and DeceptiveBusiness Practices Act; and (5) a common law false light claim. Innovus argues that the Court lacks personal jurisdiction over it and that Plaintiffs' claims do not state a claim for relief in any event. The Court will first address the personal jurisdiction issue, and then turn to Innovus's 12(b)(6) arguments.

ANALYSIS

I. Personal Jurisdiction

A challenge to a court's exercise of personal jurisdiction over a defendant is made under Federal Rule of Civil Procedure 12(b)(2). "Federal courts ordinarily follow state law in determining the bounds of their jurisdiction over persons." Walden v. Fiore, 571 U.S. 277, 283 (2014) (quoting Daimler AG v. Bauman, 571 U.S. 117 (2014)). The Illinois long-arm statute² requires nothing more than the standard for federal due process: that the defendant have sufficient contacts with the forum state "such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice." Brook v. McCormley, 873 F.3d 549, 552 (7th Cir. 2017) (quoting Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)). In other words, a defendant "must have purposely established minimum contacts with the forum state such that he or she 'should reasonably anticipate being haled into court' there.'" Tamburo v. Dworkin, 601 F.3d 693, 701 (7th Cir. 2010) (quoting Burger King Corp. v. Rudzewicz,471 U.S. 462, 474 (1985)). When a defendant moves to dismiss under Rule 12(b)(2), the plaintiff has the burden of demonstrating personal jurisdiction over the defendant. Purdue Research Found. v. Sanofi-Synthelabo, S.A., 338 F.3d 773, 782 (7th Cir. 2003). The Court resolves all factual disputes in Plaintiffs' favor. Id.

There are two types of personal jurisdiction. General jurisdiction exists when the party's affiliations with the forum state "are so constant and pervasive as to render [it] essentially at home" there. Daimler, 571 U.S. 117, 122 (2014). Because Innovus is a Nevada corporation with its principal place of business in California, R. 15 ¶ 4, and Plaintiffs have not otherwise asserted that this Court may exercise general jurisdiction over Innovus, the Court considers only specific jurisdiction.

Specific jurisdiction grows out of "the relationship among the defendant, the forum, and the litigation." Walden, 571 U.S. at 284. This type of jurisdiction requires that "(1) the defendant [] purposefully availed himself of the privilege of conducting business in the forum state or purposefully directed his activities at the state; (2) the alleged injury must have arisen from the defendant's forum-related activities; and (3) the exercise of jurisdiction must comport with traditional notions of fair play and substantial justice." Felland v. Clifton, 682 F.3d 665, 673 (7th Cir. 2012). Where, as here, the plaintiff's claims are for intentional torts, the purposeful availment inquiry focuses on whether the conduct underlying the claims was purposely directed at the forum state. Tamburo, 601 F.3d at 702. In such cases, courts look to whether the plaintiff has shown "(1) intentional conduct (or 'intentional and allegedly tortious' conduct); (2) expressly aimed at the forum state; (3) with the defendant's knowledgethat the effects would be felt—that is, the plaintiff would be injured—in the forum state." Id. at 703 (citing Calder v. Jones, 465 U.S. 783, 789-90 (1984)). This is known as the Calder test. A brief discussion of Calder is helpful here.

In Calder, an entertainer sued a magazine reporter and his editor for libel, invasion of privacy, and intentional infliction of emotional distress in California. Id. at 785. The reporter and the editor were residents of Florida and worked for the National Enquirer, a Florida corporation with its principal place of business in Florida. Id. The editor had no contacts with California; the reporter had travelled to California a few times in connection with his work, however, did most of the research for the story in dispute over the phone. Id. Both the reporter and the editor challenged the California court's jurisdiction over them. Id. at 785-86. The reporter and the editor argued that neither should be subject to California's jurisdiction simply because the article appeared in California. Id. at 786.

The Supreme Court held that jurisdiction was proper because the reporter's and the editor's "intentional, and allegedly tortious, actions were expressly aimed at California." Id. at 789. The Court reasoned:

The allegedly libelous story concerned the California activities of a California resident. It impugned the professionalism of an entertainer whose television career was centered in California. The article was drawn from California sources, and the brunt of the harm, in terms of both [the entertainer's] emotional distress and the injury to her professional reputation, was suffered in California. In sum, California [was] the focal point both of the story and of the harm suffered. Jurisdiction over petitioners [was] therefore proper in California based on the "effects" of their Florida conduct in California.

Id. at 788-89. Moreover, the reporter and the editor knew that the article would have its greatest effect in California because the article's subject lived there and the National Enquirer had its largest circulation there. Id. at 790.

The Supreme Court also applied the "effects" test in a companion case, Keeton v. Hustler Magazine, Inc., 465 U.S. 770 (1984). In Keeton, an editor of Hustler Magazine sued the magazine for five separate acts of libel in a New Hampshire court. Id. at 772. Hustler Magazine was an Ohio corporation with its principal place of business in California. See id. However, the magazine sold between 10,000 and 15,000 copies of its magazine in New Hampshire each month. See id.

Hustler Magazine argued that a New Hampshire court's exercise of jurisdiction over it would be unfair because its only contact with the forum was circulation of its magazine. See id. at 770. The Supreme Court disagreed. The Court stated that Hustler Magazine's "regular circulation of magazines in [New Hampshire was] sufficient to support an assertion of jurisdiction in a libel action based on the contents of the magazine." Id. at 773-74. In addition, the Court agreed with the lower court that Hustler Magazine's circulation of its publication throughout New Hampshire was purposeful activity that "'inevitably affected persons in the state.'" Id. at 774. Furthermore, "[s]uch regular monthly sales of thousands of magazines cannot by any stretch of the imagination be characterized as random, isolated, or fortuitous." Id. Thus, the minimum contact requirements of due process were met and jurisdiction over Hustler Magazine was proper. Id.

Here, Plaintiffs allege Innovus deliberately distributed at least one publication in Illinois in February 2017.³ R. 15 ¶ 34. That publication is one of the publications at issue in Plaintiffs' complaint. The effects of its actions were felt in Illinois, because that is where Plaintiffs were located. Like in Calder, by publishing an advertisement in a local newspaper directed at residents of Illinois concerning an...